Debt Financing means...

• A. Borrowing money that must be repaid with interest.
• B. Raising money by selling ownership shares in the business.
• C. Leasing equipment for a fixed period.
• D. Receiving grants.

Answer: (A)

Debt financing is borrowing money that must be repaid with interest. This means the business receives cash upfront and agrees to repay the principal along with interest over time, without giving up ownership in the company. This distinguishes it from other ways to raise funds: selling ownership shares is equity financing and dilutes control; leasing is a rental arrangement to use an asset rather than borrowing funds to own it; grants are funds that typically don’t need to be repaid. So the statement that describes debt financing accurately is borrowing money that must be repaid with interest.